1. Srisawad
Power1979 (SAWAD:TB)
Business Description
Srisawad Power 1979 Public Company Limited is a Thailand-based company engaging in financial services. The
company operates two business segments: hire purchase and loans. SAWAD also offers a wide range of hire
purchase financing and secured loans for houses, land, personal and commercial vehicles, motorcycles,
international labors, agricultural machinery and equipment, hire purchase of new cars, and unsecured personal
loans for retail customers in Bangkok and its surrounding areas as well as upcountry provinces, including
Ratchaburi, Suphanburi, Lopburi, Chonburi, Saraburi and Ayutthaya. Its operation process include provision of
credits, follow-up overdue payment, installment payment plans and asset management service.
The Company’s subsidiaries comprise Fast Money Company Limited, and Srisawad Asset Management
Company Limited.
Core Product & Principal Receivables
➢ Auto Backed Loans: THB 7,367.76 million (203,082 contracts)
➢ House and Land Backed Loans: THB 1,272.12 million (5,133 contracts)
➢ Personal Loans: THB 10.55 million (720 contracts)
➢ New Motorcycle Hire Purchase: THB 133.95 million (4,910 contracts)
*Data as of 31st March 2015
➢ SAWAD focuses on providing auto backed loans, which services provided are more secured compared to
other competitors.
Investment Thesis: “With Aggressive loan growth and more brand new business, SAWAD is destined to
become a financial convenient store for everyone.”
According to BOT’s data, in the past 2 years, household debt to GDP has risen significantly as a result of frenzy
spending spree of Thais (with support from the government’s project e.g. The first car program). The ongoing
high household debt of 82.8% should help propel its lending business. Loan growth from the recently opened
branches will be accelerated in the next 1-2 years given that the firm has built up close relationships with locals
and gained market share from small ‘loan sharks’. In addition, 30% of its customers usually renew the borrowing
agreement once they complete the previous installment programme. SAWAD will have substantial growth as
households’ financial burdens will need at least two years to deleverage.

2. SAWAD also has a competitive advantage due to its coverage network that is larger than its peers. The faster the
company can secure locations for new branches, the better its market position in underpenetrated areas.
Furthermore, there is no product differentiation in vehicle-pledging loans, but what can attract customers is a fast
approval process and strong presence in the area. In addition, the company has set ambitious long-term ROE
targets of 33-35% per year during 2015-2017, hence the profit growth thus experienced double digit profit
growth by 49 per cent at the end of 2015 1st quarter. It tends to focus on providing loan-loss reserves (with 62%
of NPLs) with well managed asset quality and new business from debt collection services and Nanofinance. With
strong loan growth largely branch expansion and new business in Nanofinance for SME and debt collection
business, SAWAD surely will become a financial convenient store where they can get any financial product
suited their needs with lightning speed.
Key Thesis Points:
➢ Ambitious ROE target of 30-35%, propelled by high loan growth - deriving key earnings drivers
❖ The company's leaders set their loan growth target of 20-30% during 2015-2017, driven by aggressive
lending in the bank's untapped market. According to the National Statistical Office (NSO) : 25 million
members of the workforce were "out of system" (not on a payroll or drawing a fixed salary) - expecting
its 2015 loan growth to reach 20%. Targeting low-income clients (those difficult to receive loans from
large banks)
➢ Nanofinance and debt collection services to support growth in 2015
❖ Management has set its lending budget at THB 500m for this project and it will commence in 2015 3rd
quarter. Its potential clients will be buyers (franchisees) of local franchise brand names, such as Jiang
Fish Ball, Kieng Empire, Hong Kong Noodles, and Joke Bangkok.
❖ Moreover, the company will diversify into distressed asset management, wet market loans and debt
collection services through its subsidiary (SWP). The company has set a budget of THB 1bn for these
new ventures.
*SWP bought THB 200m of NPLs during 2nd quarter of 2015 at the discount rate of more than 20 per
cent from face value.
❖ The company has already signed contracts with Toyota Leasing (Thailand) Co.,Ltd., Nissan Leasing
(Thailand) Co.,Ltd. and SME Bank to offer debt collection services. The company will receive fee
income on a fixed rate or revenue-sharing basis, depending on the agreement with those financial
institutions. The firm is also negotiating with other large commercial banks to offer debt collection
services. This new business will boost bottom line because SAWAD can utilise its wide branch network
coverage and effective in-house debt collection department to deliver services to clients. The management
expected revenue contribution from this business to be 15-20% of total revenue within 5 years.
❖ According to Asean Confidential, an FT research service on South East Asia, Thai household debt will
approach or exceed 100 per cent of GDP by 2020 under likely macroeconomic scenarios – and this does
not include large amounts of borrowing from illegal money lenders by the poorest Thais.
➢ Branch Expansion - Financial Convenience Store (Largest branch network among its peers)
❖ SAWAD plans to raise its branch network to 1,300 offices in 2015 and 1,500 offices in 2016 from 1,059
offices in 2014. The company also plan to expand its business overseas.
❖ Branch expansion will increase debt collection efficiency and also boost company’s loan growth.
➢ Plan to launch bonds of THB 2.5bn in late 2015 3rd Quarter to boost expansion
❖ The company plan to launch THB 2.5bn of bonds in 2015 to support the firm's rapid expansion outlook.
The increase in number of branches could allow the firm to boost its lending as well as its efficiency in
debt collection.
❖ SAWAD came up with a low net-D/E ratio of 1.7x at end of March 2015. The new borrowing will bring
its D/E ratio up to 2.4x, which is far below than the Bank sector’s mean of 10x. This implies how
SAWAD could leverage its D/E ratio for aggressive expansion for the next couple of years without a cash
call. For now SAWAD are free of concerning about its financial positions for this year and next.
Risk Analysis:
➢ High NPL ratio compared with consumer finance peers
❖ SAWAD’s NPL Ratio is the highest among its consumer finance peers, because some clients have
income streams on a quarterly or half-yearly basis. However, We believe that its low loan-to-value at 30-

3. 70% and high interest rate charged cover any default risks, which therefore results in an impressive bad
debt recovery rate of 50% in the first year after customers go into default.
➢ Sale of repossessed vehicles
❖ SAWAD resells repossessed vehicles through its local branches instead of outsourcing to third parties.
We think that the risk of carrying high foreclosed collaterals is manageable because SAWAD has
experience in the used-vehicles markets. Its strategy is to resell repossessed vehicles as soon as possible
to ensure good recovery.
➢ Dependance on senior management
❖ Major shareholders and management has a strong background in the vehicle pledging loan business in the
vehicle-pledging loan business in the provincial markets.
➢ Provisions charged remain high which are in line with SAWAD’s larger portfolio. However, we believe
that its effective in-house debt collection unit will mitigate rising NPL amid high household debt
Tailwinds:
➢ Specialise in offering personal and small loans
➢ Government support for Nano-finance license
commencement
➢ More NPL (as Bank’s NPL has risen) and Bad
Debt portfolio to be collected
➢ New business development: debt collection & bad
debt management
➢ Possible M&A with local operators
Headwinds:
➢ Sluggish domestic economy
➢ Competition within Thai economy despite in the
past and future
➢ Aggressive expansion of its rivals
➢ Strong presence of local operators
➢ Regulatory changes in the future about leasing
business i.e. more restriction
Important Data Points:
➢ Market Cap: THB 40289.92 M
➢ Growth rate YoY (Q1/2015) : Revenue +39.12% Earning +49.18%
➢ ROE 31.8% Vs. Industry’s ROE 12%
➢ % shares held by Major shareholders: 55.52% Kaewbootta family
➢ % shares held by Institutional Investors : 6.63%
➢ Awarded Nanofinance licenses from the Ministry of Finance in May 2015. The company planned to offer
nanofinance loans for THB 500M due to high risk nature of the loan.
➢ Strong performance compared to Financial Industry and SET (Characteristic of Leader)

4. Valuation
According to our forecast model and Professor Aswath Damodaran’s Two-Stage growth discount model, the
target price of SAWAD will be THB 48.17 per share. It implies an upside ~20%. Hence, we would like to give a
“Buy” rating with target price THB 48 per share.
Moreover, as of Jun 26, 2015, the consensus forecast (since August 2014) amongst 7 polled investment analysts
covering SAWAD advises that the company will outperform the market.
Previous consensus forecast advised investors to hold their position for SAWAD.
Recommendation : BUY
Price Target : THB 48 (+23.8%) as of 07/06/2015